Surfing the Winds of Change

Bay Area Wind Surfers

A year and a day or two ago the Perma-Bear wrote a note to me on a Post-It note. It said, “Ask [me] about Starbucks Indicator”. It also set the date to ask this question, September 2, 2012. That date fell in the middle of this year’s Labor Day weekend, so I’ve delayed until now to do as I was requested. Consider it asked.

For the casual reader, let me add a bit of background. In the depths of the winter of ’09, I could walk into my neighborhood Starbucks coffee shop, saddle up to the register and immediately place my order for a Grande Latté. There was no line, there were no other customers in the store, there was just me, Aaron, the store manager and his two associates. This ritual was repeated often enough for its innate strangeness to finally permeate the consciousness of my un-caffeinated brain. Kudos to Starbucks for keeping this staff through the depths of the Great Recession.

Though 2009 and 2010 I noticed a gradual change. Customers began to reappear. A veritable line began to form. I actually had to queue to place my order. It was about this time that I coined my version of the ‘Starbucks Index’. Others had preceded me, but I believe that mine is still unique. Simply put, I count the number of patrons ahead of me in line when I enter the door. Customers will race each other to the front door, but past that portal it is all courtesy and grace. It is both a simple and easy measurement. I noticed and would report that the line continued to grow.

Then came the summer of 2011 with its political bickering and market down turn, I marched into work on the first Friday in September, full of bravado and tossing off claims of how great my Starbucks Index was that morning. This must have ticked the Perma-Bear off, because he wrote the note. You see folks; the Perma-Bear is a student of history. He has read the histories of the Great Depression. Both Hoover and Roosevelt struggled mightily to right the economy then. Save the advent of World War II, who know how long those struggles could have gone on.

A year has passed since the note was written. The economy has not tanked, the past has not been revisited. Between now and then the DOW has increased 2,000 points. The S&P has matched pace. With 20/20 hindsight one can see that the note was written at the nadir of a minor correction. With all this exposition I don’t really expect a response. I’m just glad that he was wrong.

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